“Yeah, I’m worried,” Senate Environment and Public Works Committee Chair Shelley Moore Capito told E&E News when asked about the possibility of losing funding for West Virginia’s hydrogen hub. “It’s a big deal for us.”
The uncertainty only adds to the challenges facing the hydrogen industry.
The Biden administration created a two-pronged hydrogen strategy via the bipartisan infrastructure law and the Inflation Reduction Act. The IRA’s tax credit for clean hydrogen production, known as 45V, was meant to help spur supply of the fuel. The policy survived the rollbacks in the One Big Beautiful Bill Act that Trump signed in July, but Republicans shortened the timeline for the write-offs from 10 years to two.
The hydrogen hubs, meanwhile, were meant to coordinate producers and offtakers to create regional ecosystems that could someday be interconnected with pipelines and other infrastructure. Even before the cuts, however, the hubs were struggling to generate enough demand.
“Low demand explains why the West Coast hydrogen ambitions have never amounted to much,” Martin Tengler, the analyst who heads the hydrogen research team at the consultancy BloombergNEF, wrote in a memo to investors Monday. “Low demand stems from a lack of incentives such as the quotas or carbon prices that are present in Europe, combined with a focus on sectors where hydrogen use is highly uneconomical.”
As a result, he argued, the decision to slash funding for those two hubs “has little direct impact on the pipeline of projects BloombergNEF has expected to come online by 2030.”
Of the six commercial green hydrogen projects larger than 1 megawatt that the consultancy tracked in its latest outlook report, four have reached a final investment decision and just one is operational. “All five are very small,” the investor note stated.
In an email to Canary Media, Tengler said the impact of eliminating funding for all the hubs “would be negative, but the most important things are the tax credits.”
Back to the States
The hubs won’t necessarily fall apart without the federal grants.
California’s regional hub, known as the Alliance for Renewable Clean Hydrogen Energy Systems, or ARCHES, plans to continue without the financing and could turn to state funds to make up the difference. The Golden State’s newly overhauled cap-and-invest program is one potential source. The state Clean Truck and Bus Vouchers program, known as HVIP, and the California Energy Commission’s Clean Transportation Program Investment Plans could bolster offtakers.
“California has been a hydrogen hub for many years, and it’s getting bigger and bigger,” Fritz said. “It’s already in application. There are people riding on hydrogen fuel-cell buses every day in California.”
Roxana Bekemohammadi, executive director of the U.S. Hydrogen Alliance, said it’s possible that Congress could extend the 45V tax credit before it expires at the end of 2027. But in the meantime, she said, “state-level hydrogen incentives are the most stable path forward.”
Whether states can deliver a green hydrogen industry at scale, however, remains to be seen — and removing billions in federal funding certainly doesn’t make the task easier.
“The cuts to these hubs seem shortsighted and ultimately will result in the loss of jobs in our country,” said Carrie Schoeneberger, an industrial analyst who covers hydrogen for the Natural Resources Defense Council. “This will put the U.S. a step back and threaten U.S. leadership, which is against the stated aims of the current administration for American energy dominance.
Jeff St. John contributed reporting.
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